Chancellor Rachel Reeves has announced a pensions review to divert billions of pounds of investment into the UK economy, boost retirement pots and cut out waste.

The government wants to tap into the £800 billion funds that will be held in defined contribution, or money purchase, schemes and £360bn in local government pensions schemes by the end of the decade.

It says that even a 1 percentage point shift of assets into productive investments could mean £8 billion of new investment to grow the economy and build vital infrastructure by the end of the decade.  

The first phase of the review will be led by the first-ever joint Treasury and Department for Work and Pensions Minister, Emma Reynolds, Minister for Pensions.

Later this year the review will consider further steps to improve pension outcomes and increase investment in UK markets, including assessing whether pensions meet the needs of retirees.

The Chancellor and the Pensions Minister will chair a roundtable with the pensions industry on Monday to start intensive engagement with the industry. 

The Treasury says the measures will help savers using these schemes to build up better retirement pots as productive assets are more likely to provide higher returns.

Action has already been taken to boost retirement savings through the Pensions Bill, which introduces a Value for Money Framework to promote better governance and achieve higher returns – boosting the pension pot of an average earner who saves over their lifetime in a defined contribution scheme by over £11,000.   

There has been broad support for the review and its intended outcomes across the investment and pensions sector.

Phoenix Group chief executive Andy Briggs said: “Phoenix Group has committed to allocate 5% of assets in our default funds to unlisted equities by 2030 which will allow UK savers to invest in a more diversified portfolio.

“Our key priority is to deliver good outcomes for our customers and we are confident that Phoenix Group could invest up to £40 billion to support the economic growth agenda whilst keeping policyholder protection at its core. 

“With only one in seven people in the UK saving enough for a decent standard of living in retirement, we are happy to see that this review will expand to look at pension adequacy.”

He said that he hopes there he a commitment to increasing auto-enrolment contributions. 

Royal London group chief executive Barry O’Dwyer said: “We are particularly pleased the review will focus on delivering better retirement outcomes for people, as this must always be the main priority of the pensions system.

“We are also encouraged that the next phase of the review will examine retirement adequacy, as creating a long-term plan for increasing contributions will have a major impact on improving retirement outcomes and helping to finance growth.” 

Aviva director of workplace savings and retirement Emma Douglas said: “We fully support government’s ambition to get pension funds invested in a way that both supports UK growth and improves outcomes for savers.”

M&G chief executive Andrea Rossi added that “there are significant opportunities ahead to give the real economy a boost over the next decade and beyond.”

Michael Moore, chief executive of the British Venture Capital Association, said: “The BVCA’s Investment Compact has already brought together over 100 growth equity and venture capital firms committed to working with pensions schemes to consider effective structures that attract investment.”

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